SBI Requests RBI To Allow Banks To Fund M&As

“We have been requesting the regulator and will make a formal request from the IBA (Indian Banks' Association) also, that at least start with some listed companies where the acquisitions are more transparent and are approved by the shareholders," Setty said at a panel discussion at FIBAC 2025.

Indian banks are barred from lending for mergers and acquisitions, pushing companies to rely on non-banking financial firms or bonds to finance such deals.

“Of late, corporate funding has shifted towards capital markets and private credit. But there are long-term financial requirements, so banks will have to step up for the next wave of long-term capex, which is essential for India’s growth ambition,” Setty said.

“Deleveraging has taken place in the corporate sector, and companies now hold significant cash balances. Our internal estimates put cash availability at Rs 13.5 trillion, which means capex expansion, brownfield investments, ongoing capex, most are being met through internal resources. While many corporates have strong capex plans, these may not fully crystalize into corporate credit, as they either have access to capital markets or robust internal funds.” he said.

The corporate bond market's popularity is on the rise, especially over traditional bank loans. This is mainly due to favourable rate conditions. Between April and July, firms raised a record Rs 4.07
trillion through bonds, according to Prime Database.